Rethinking short-term property in challenging times.

April 07, 2020 01:37 PM

We are facing challenges that are going to reshape our industry. I’m not trying to panic anyone, and I’m not being alarmist. But the impact of what we’re all going through with the virus that’s spread across the world is hitting the economy, and it’s going to keep on doing that.

Over the next six months, we’ll start to understand just how the country will recover financially, and what shape each industry will be in.

But in the short term, there are some questions a lot of people will be asking themselves especially investors.

One of it is around short-term vs. long-term gains in property, and what the right moves are from a strategic vantage point.

"We are facing challenges that are going to reshape our industry. I’m not trying to panic anyone, and I’m not being alarmist. But the impact of what we’re all going through with the virus that’s spread across the world is hitting the economy, and it’s going to keep on doing that."

Airbnb & Short-Stay

Owners who have planned on investing in or who've built up a portfolio of short stay properties for guests using Airbnb are going to be worrying right now. Both domestic and international tourism has stopped, this being felt by the travel and hospitality industry and now individual owners too. Airbnb properties are designed to cater to short-term stays and when those guests stop arriving, their assets being effected too.

Property Owners are going to gear towards longer term rental options and whether this shift will be the right move for their portfolio. The higher nightly rate that Airbnb rentals provide are always going to be more attractive and it’s what drives many property owners to embrace this option in the first place. What it brings with it, unfortunately, is that instability especially in times of a downturn. What we're anticipating is that the current downturn could last a while – and at this point, we won't know when travel industry will pick up again – the nightly rate becomes far less attractive when you can’t get holiday-goers into your holiday property.

The stability of a longer-term occupancy gives you the chance to start recovering a lot sooner.

Longer-Term Rentals Are Still Growth Assets

The flexibility of the Airbnb market does appeal to owners who want to work on their property actively and push their income from it. But short stays aren’t the only way to do that. In fact, when you are able to rely on the longer-term occupancy of your tenants, and they are reliable, and they are dedicated to their living space as a home, you can actually do so much more. Where you could make minor experience, cleaning and fee adjustments on an Airbnb to change the real-time cashflow, if you invest into a longer term property in a smart way, making improvements and working with your tenants to better understand their needs, you can often increase your gains far more, over a longer period. Thinking long term benefits - "A 12 month increase in rent that you know will last, is worth more than a spike over a few weekends."

"A 12 month increase in rent that you know will last, is worth more than a spike over a few weekends."

Longer-Term Right Now Will Need Some Patience

It's a fact. Yes, the longer-term rental market is going to be more stable for your property. Australian residents and local residents need a home and renting is going to be the option. But with the downturn in the economy, you might find that you’ll need a little patience, a little empathy and space for tenants who might be hit hard financially.

You'll need to find space to wait it out, in exchange for the longer-term wins and steadiness. But if you’re able to do that now, you'll actually have the chance to build a lasting and trusting relationship with good tenants who will stay with you for years, support rental increases in-line with your own investments in the property and take care of it themselves while they live there.

This you won’t get from an Airbnb guest.

If you would like to understand how our Yabonza can shape your property's future in this challenging times, speak with our knowledgable asset managers.